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U.S. natgas speculators switch from net long to net short -CFTC

U.S. natural gas speculators switched their positions to net short after being net long since the start of April, betting prices will have to remain low to encourage generators to burn more of the fuel left in inventories after a warm winter.

Speculators in four major NYMEX and ICE markets cut 35,323 contracts, changing their bets from a bullish 30,626 net longs in the week to May 17 to a bearish 4,695 net shorts in the week to May 24, the U.S. Commodity Futures Trading Commission said on Friday.

Before April, the market was net short for 66 weeks in a row from December 2014 through the end of March 2016 as energy firms produced record amounts of gas while the El Nino weather pattern kept heating demand low during the winter of 2015-2016. That was the longest bearish streak on record, according to Reuters data going back to 2010.

To avoid filling storage caverns to their maximum capacity after a warm winter left stockpiles at record highs, analysts said prices will have to remain relatively low this year to pressure producers to cut output and encourage power generators to burn more gas instead of coal.

Spot gas prices at the Henry Hub benchmark GT-HH-IDX have averaged $1.94 so far this year, while futures for the balance of 2016 were fetching $2.48. That compares with an average of $2.61 in 2015, the lowest since 1999.

Analysts said, however, that they expect gas prices in 2017 to rise enough to encourage drillers to boost output again to meet forecast growth in U.S. pipeline and liquefied natural gas exports and industrial demand.

Gas futures for calendar 2017 were trading around $2.99.
Source: Reuters (Reporting by Scott DiSavino; Editing by Andrew Hay and Jonathan Oatis)

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